November 2019 Roundup: Venture Capital

Progressive VCs and Private Equity are using Tech and Analytics to Revolutionize Investing (Techcrunch)

Liquid, public markets benefit from access to mountains of readily available and cheap data. Private market investors and fund managers are often less fortunate – but those tides are beginning to turn. What tools are available for fund management, marketing, raising capital, and more?

Why it Matters

Tech. It’s not just for startups. It’s becoming more and more a part of those companies that find, invest in, and help grow these young and tech savvy ventures. Shouldn’t it be the case that those who know how to dissect tech use best-in-class tools within their own companies?

VC funds, just like their portfolio companies, need to be efficient users of capital to generate high returns – and that means operating a highly efficient company themselves. David Teten knows a thing or two about VC fund management and does a great job laying out these tools to help managers spend less time organizing data and meetings and more time creating value.

Four Paths Forward for ‘Social Products’ (The Information)

The adoption of new social platforms is predicated on ‘platform shifts’ – such as the adoption of mobile – that allow consumers to grasp and seek them out, right? Not necessarily says Sam Lessin. Shifts in consumer preferences among social platforms is already afoot, despite no advancements in tech or decline in customer acquisition cost. Here’s four paths to this innovation.

Why it Matters

With the dominance in social platforms by the like of Google, Facebook, Snap, Twitter, etc. there appears to be little opportunity for new ventures, but a new generation of social products is beginning to emerge. These differentiate by focusing on the physical world, content truth and moderation, and/or inventing new content formats, says Lessin.

For those that believe the lifetime of the major social platforms is finite (be sure to check out Scott Galloway’s The Four for more on this topic), understanding how these new platforms can develop creates both a critical understanding of future investment opportunities as well as potential cautionary flags for those performing due diligence on companies building social platforms within the ‘old guard’ business model.

Supergiant VC Rounds Weren’t Limited to Late-Stage Startups (Crunchbase)

Super giant VC rounds are not super rare anymore, according to Jason Rowley. Since 2009, the number of $100M + rounds has steadily increased – across all stages.

Why it Matters

It’s natural to think that there are more large rounds in later stage companies as public markets have performed well the last decade, prompting higher comparable valuations, among other reasons. But what is suggested by the fact that earlier stage rounds (and therefore younger companies) are increasing in dollar magnitude as well? Is it a sign of growing irrational exuberance? A product of aforementioned growth in public market comps? Investors more willing to write bigger checks sooner (following exits in mega deals like Uber and AirBnB?) Or the new normal?

Why the Next Professional Network will Look Nothing like LinkedIn (Brianne Kimmel)

LinkedIn was born in an era where the middleman was a necessary component to the job search. Are we already at a time where the value proposition of LinkedIn is outdated? Brianna Kimmel explores how LinkedIn’s first-mover advantage built it’s inaugural moat, what broke in the vertical, and who is fixing it.

Why it Matters

“OK Boomer” – a phrase commonly said by Millennials to connote an out-of-touch perspective – might parallel two major industries that feature commission grabbing gatekeepers: Recruiters and Real Estate Agents. For the former, at least, LinkedIn’s platform, UX, reliance on middleman and a ‘conventional’ approach to hiring put it at risk.

Has the value of LinkedIn’s network effects eroded? What about the business model? It is still effective? What is your personal experience with LinkedIn recently?

Moneyball in Later Stage Investing? (Alex Iskold)

The money-ball approach, first made famous by Bill James in the sport of baseball and later popularized by author Michael Lewis, is a cost-conscious approach to business – one that focuses on maximizing resources to be able to do the most with less (often with the use of statistical models and quantified signals). How do you build a better model? You give it all the necessary data. This, according to Alex Iskold, is the point of scout programs at firms such as Sequoia.

Why it Matters

Scouts, not unlike those peppered across the globe feeding information to MLB General Managers, allow large funds an ability to write small checks in earlier rounds – and gather data. This allows well capitalized firms an ability to hire Data Scientists to build models that can create significant competitive advantages (faster sourcing, more efficient diligence, more expansive focus, improved decision making).

Is it possible this could create inequality between large and small funds? Yes. How problematic will this be? That depends on how willing larger firms are to be transparent in the hopes that the rising tide will lift all boats. How likely? I guess we’ll have to wait and see.

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